Question

URGENT

Mason Engineering manufactures audio devices for cars and uses job order costing. There are two departments. In Department A, overhead is applied on the basis of machine-hours, and in Department B, on the basis of direct labor hours. At the start of the current year, the following budget estimates were developed in order to compute the overhead application rates:

	Department A	Department B
Direct labor	$420,000	$300,000
Manufacturing overhead	$540,000	$412,500
Machine-hours	19,000	2,000
Direct labor hours	26,000	24,000

4,000 Audio circuit modules (Job no. 100) were produced in January. The cost records for the job show the following information:

Job no. 100 (4,000 units of product):	Department A	Department B
Cost of materials used on job	$6,800	$4,500
Direct labor cost	$8,100	$7,200
Direct labor hours	540	600
Machine-hours	250	100

a. Compute the overhead rate that should be used for each department in applying overhead costs to Job no. 100.                 [2 Marks]

b. What is the total cost of Job no. 100, and what is the unit cost of the product manufactured on

this production order? [3 + 3 Marks]

                                                                                                

c. If the actual overhead costs and actual machine hours for the year were as given in the table, determine the over- or underapplied overhead in each department for the year. [2 Marks]

	Actual overhead ($)	Actual machine hours
Department A	517,000	17,000
Department B	424,400	26,000

Answer 1

	Department A	Departent B
Manufacturing overhead	540000	412500
Machine hours	19000
Direct labor hours		24000
Rate	28.42	17.19
Direct labor costs	420000	300000
Direct labor hours	26000	24000
Rate	16.15	12.50
Job No. 100
	Department A	Departent B	Total
Direct aterials	6800	4500	11300
Labor costs	8100	7200	15300
Manufacturing overhead	=28.42*250	=17.19*600
	7105	10314	17419
Total costs	22005	22014	44019
Units			4000
Unit cost			11.00
	Department A	Departent B
Actual overhead costs	517000	424400
Actual machine hours	17000
Actual labor hours=estimated		24000
Rate	30.41	17.68
Overheads for Job 100	7602.94	10610.00
Actual overhead cost	7602	10610
Applied cost	7105	10314
Underapplied	497	296